China’s threatened anti-dumping duties on Australian barley exports may well be without merit and even a form of economic coercion in retaliation for the call for an investigation into the COVID-19 pandemic, among other issues. But it is also a predictable consequence of this country’s aggressive use of anti-dumping measures, which invites retaliation.
China is just as aggrieved by the operation of Australia's anti-dumping regime as it is over calls for an investigation into COVID-19. China is now doing to Australia what we have long done to them. The nexus to our foreign policy may be less important than the nexus to our trade and industry policy.
Successive Australian governments have made it easier for producers to bring anti-dumping complaints against foreign competitors at the expense of other Australian businesses and consumers. This country has become a prolific user of anti-dumping measures, undermining our free trade credentials.
Australia’s anti-dumping regime is subject to growing scrutiny, both internationally and domestically.
In his interview with The Australian Financial Review on Thursday, Trade Minister Simon Birmingham invited China to take Australia to the WTO over its duties on Chinese steel imports if China believed it had a case. He should be careful what he wishes for, as our anti-dumping regime is increasingly pushing up against WTO rules.
Indonesia took Australia to the World Trade Organization over our imposition of anti-dumping duties on A4 copy paper, a case we lost at the end of last year.
Domestically, the anti-dumping regime has been criticised by the Productivity Commission, which noted in its most recent review of trade and industry assistance that "there are no convincing justifications for these measures, and they reduce the wellbeing of the Australian community".
As long ago as 1989, the Garnaut report called for Australia to do away with anti-dumping measures.
While WTO rules permit the use of anti-dumping duties, they do not require countries to operate an anti-dumping system. The WTO rules around anti-dumping measures are designed to discipline, not encourage, their use. This nation's anti-dumping regime has become increasingly undisciplined, with the government even facilitating industry in bringing anti-dumping complaints.
Favouring producers over consumers
Dumping is a legal construct rather than an economic concept. There are special cases in economic theory where predatory dumping may take place in a way that allows a foreign producer to drive domestic producers out of business, dominate the domestic market and raise prices, but that is not what we have seen in practice.
Australia’s anti-dumping measures are frequently directed against producers in multiple jurisdictions. The predatory behaviour designed to raise prices is on the part of domestic firms seeking protection from foreign competition.
China has particular grievances about Australia’s anti-dumping system. One of its conditions for entering into free trade agreement negotiations with us in 2005 was that we would treat China as a market economy. But Australia has continued to treat China as a non-market economy for the purposes of applying specific anti-dumping duties. This practice allows the Australian authorities to use made-up prices to impute dumping margins and the imposition of duties.
Anti-dumping has also been a key point of contention in the trade disputes between China and the US.
In some cases, Australia has imposed tariffs of up to 144 per cent of imports of steel products from China. While China is frequently criticised for promoting excess capacity in the global steel industry, in reality, this spare capacity has more to do with cycles in demand than structural problems with supply. Australian steel producers are effectively seeking protection against the global business cycle at the expense of other Australian businesses and consumers.
China is, of course, guilty of numerous abuses of the international trading system, but exporting cheap steel and other products to Australia is not one of them.
China is targeting barley producers because it knows they are a politically sensitive constituency that will get Canberra’s attention. Apart from launching a protracted WTO case against China, there is little Canberra can do to stop China imposing duties if it chooses to do so.
However, it can discipline its own behaviour in relation to its anti-dumping measures that invite retaliation of this kind. In particular, it is always open to the minister under Australian law to reject the imposition of anti-dumping duties on public interest grounds. The minister should put the interests of consumers ahead of producers.
Australia should continue to promote its foreign policy interests, including entirely legitimate demands to investigate the pandemic, even more so if threatened with economic coercion.
But the uncomfortable truth is that our barley producers are just as much casualties of Australian industry and trade policy as they are of Chinese foreign policy.